Dream11 to discontinue its investment arm Dream Capital

Dream Sports, the parent company of fantasy sports platform Dream11, has decided to discontinue its venture capital and merger & acquisition arm Dream Capital. This comes after the government’s move to impose 28% goods and services tax (GST) on online real money games.

The Economic Times, which reported the development first, highlighted that Dream Capital’s head Dev Bajaj is also leaving the firm. As per Entrackr’s sources, the decision to halt services of Dream Capital was taken two to three months ago.

Dream Capital was launched in August 2021 with a $250 million worth fund to focus on startups in sports, online gaming, and fitness-tech space. The firm used to do multi-stage investment strategies ranging from $1 million to $100 million ticket sizes.

Cricket NFT platform Rario, Dream Capital’s largest investment, hogged the headlines as it raised $120 million in its Series A round. However, the startup failed to perform and fired several employees. Rario’s co-founders have already left.

The investment firm has also invested in more than 10 startups including Fittr, IMBR, Elevar, KheloMore, and Marketwolf.

Dream11 declined to comment on the story while queries sent to Bajaj did not elicit an immediate response.

As of fiscal year 2021-2022 (FY22), Dream11 was the highest revenue-generating fantasy sports company in India with Rs 3,841 crore revenue from operations, forming 42.2% of the overall industry revenues.

Last month, Dream11 received a show cause notice issued by tax authorities over alleged GST evasion to the tune of Rs 25,000. However, Dream11’s parent filed a writ petition in the Bombay High Court to challenge the notice.

Since the introduction of 28% GST for real money games, a bunch of gaming startups such as MPL, Spartan Poker and Hike Rush Gaming Universe collectively fired over 500 employees whereas Quizzy, Fantok and One World Nation had to halt their operations.

While pausing work at Dream Capital is predictable, it is also a fact that the venture itself was born of easy access to funding. So much so that it literally became a matter of creating reasons to raise more money. That rarely, if ever ends well. The risks of taxation and policy on the gaming sector was always a known and present risk, and when it came into play in 2023, few firms seem to have planned for it. That doesn’t indicate the level of maturity that handling millions of dollars in funding ought to bring. By literally super concentrating all its eggs in the gaming basket so to say through its investments, Dream11 sought to stand out as not just the biggest player, but also the backer for the sector. As it turns out, it also had the most to lose when the tide turned.